Global. Led by higher SHCOMP (+0.86% to 3503) and HSI (+0.89% to 27473) markets, Asian bourses mostly kicked off the new year on an upbeat note amid a strong Dec Caixin/Markit manufacturing PMI. After rallying 7.2% in 2020, the Dow plunged as much as 725 pts to 29881 before narrowing the losses to 382 pts at 30223, on the back of upcoming Georgia Senate runoff elections tonight (a Democrat victory would likely usher in higher taxes) along with the persistent surge in coronavirus cases, especially when the new strain of Covid-19 continues to spread rapidly.
Malaysia. Bucking the positive regional markets, KLCI made a sluggish debut in 2021, slumping as much as 34 pts to 1593 before paring the losses to 24.6 pts at 1602.6 (with selling spree focused on glovemakers and banking companies), as sentiment was badly hit by the resumption of RSS (after a long ban on 24 Mar 2020) and the cancellation of KL-SG HSR announcement. Market breadth was bearish as losers thumped gainers 934-360 with about 7.4bn shares traded valued at RM5.9bn. Meanwhile, foreign investors net sold RM852m (the largest single-day disposal since 30 Nov RM541m) whilst local institutional investors and retailers were the net buyers with RM359m and RM493m in equities, respectively.
Following the multiple SMAs and 1618 supports’ breakdown, we expect KLCI to extend its near term consolidation, with critical supports situated at 1590 (50D SMA), 1574 (50% FR) and 1557 (100D SMA) zones. A fall below 1557 may will trigger further selldown towards 1546 (61.8% FR) and 1507 (200D SMA) levels. Towards the upside, the critical resistances are pegged at 1618-1640 (23.6% FR)-1667 (200W SMA) levels.
In the absence of immediate-term drivers, KLCI may continue to extend consolidation (weekly supports: 1557-1575; resistances 1618-1640) with downside bias, as investors digest more news flows about the resurgence of Covid-19 pandemic, vaccine distributions and challenges faced by nations in vaccinating their citizens coupled with the resumption of RSS. Nevertheless, optimism on economic recovery amid the multiple Covid-19 vaccine breakthroughs, a combination of continuing fiscal and monetary stimulus, the low-interest rates environment and China's firmer economic recovery will continue to underpin interests on equity market. HLIB Research's top picks have a recovery bias (Tenaga, RHBBank, DRB, MBM and FocusPoint) combined with volatility (Bursa), defensives (TM, MQREIT), value (IJM, Sunway, Armada) and sold down pandemic beneficiary (Top Glove).
Source: Hong Leong Investment Bank Research - 5 Jan 2021